Why the Left is Wrong about Airport Privatisation

Angie Myers, CCS Intern

Throughout the entire privatisation process, the Left voiced its discontent with the measure. They teamed up with the labour unions and staged well-publicised protests at both Delhi and Mumbai airports. They claim that the government is capable of modernising the airports through the existing Airports Authority of India (AAI), rather than through private parties.

The first claim of the Left is that AAI’s proposal was not given full consideration both before and during the bidding process. The reason AAI’s bid did not make it to the final round was due to the fact that it only earned 49% marks on technical parameters. This proposal was only slightly modified from the original one submitted back in June 2003. If the proposal received just 49% marks, why should we believe that AAI is capable of properly modernising the airports?

The second claim is that the government broke their promise of not privatising a profit making company and conflicted with labour management relations– a violation of the United Progressive Alliance’s National Common Minimum Programme. Though Prime Minister Singh did go back on his party’s promise, it is important to note that the government will actually be receiving more money than when it operated the airports. As part of the agreement, AAI will receive 46% of Delhi’s gross revenue and 38% of Mumbai’s gross revenue. The revenue projections for Delhi and Mumbai’s airports are between Rs. 900-1000 crore a piece. This means that AAI’s total yearly revenue from these airports will be Rs. 840 crore. Compared to AAI’s 2004-2005 profits before tax of Rs. 600 crore, the reasons behind privatisation become more obvious. All 280 crore reasons.

The third claim is that bidding processes yielded a monopoly since only two bids were proposed and each consortium could win only one airport. They claim that the situation created a monopoly in which the government was at a disadvantage. This situation created a monopoly in which the government was at a disadvantage. This is not true as there were originally five bids made for Delhi’s airport and six for Mumbai’s airport. The reason only two consortiums entered the final round is that those two submitted the most desirable bids. Though this might have created the opportunity for private interests to have the advantage, the fact that GMR-Fraport (winner of Delhi’s contract) raised its bid to secure the contract shows that the government still had control of the situation

The fourth claim is that the government is selling profit making companies when it needs the revenue to invest in smaller airports. The sale of these two airports will actually generate more money for other airports. Besides, the AAI had plenty of time to improve these airports before talk of privatisation even began, but they did not. Furthermore, if only 50 airports out of 122 are currently operational under AAI’s management, why would the government allow them to continue to have full management control?

Their fifth issue with privatisation is that airports have national security importance and should not be under private control. It is true that the nation’s two largest airports have strategic value. And the government must be careful in how it allows the foreign parties to operate in the case of a hostile situation. However, the current hostilities between India and Germany (the home country of the foreign private interests in Delhi’s contract) are not cause for alarm, nor are they likely to be in the next 30 years.

Their sixth claim is that the government has already proved that it can provide world class profitable airports as proven by Cochin Airport. Though Cochin maybe a great example of what the government can do with a brand new airport, its achievements do not mean that Delhi and Mumbai airports would also be successful. Most importantly, the two airports are operating under different privatisation types. Cochin was a greenfield airport, whereas Delhi’s privatisation falls under the long-term lease type. Of course if you build a brand new airport, it is going to be easier to run than an airport that you have to simultaneously renovate and operate one.

The Left’s seventh claim is that passengers and Safety will suffer because businesses will put profit first. Yes, Businesses do place a high premium on profits, but if they were to produce an unsafe airport, then no airlines or people would want to patronise it. In order for airport management businesses to be successful, they must maintain safety levels. Ironically, it is the Left’s claims that private companies will put revenues first, which will ensure that safety is maintained at the airports.

As you can see, the Left’s claims are illogical and do not hold up to the numbers. Delhi airport’s privatisation is not the end of the world after all.